Critical Review on the Ratification of Principal to the Third Party - Essay Example

Critical Review on the Ratification of Principal to the Third Party No: Institute’s CriticalReview on the Ratification of Principal to the Third Party Introduction Agency is an arrangement between the two parties to perform the one or more assigned tasks strictly in line with the legally abided contract with regard to sale and purchase of goods and land or to provide services. Contrary to the domestic trade, there is a wider scope of International Trade where the role of the agents is very prominent. Take the example of import / export agents who on behalf of importers / exporters take the responsibilities of carrying goods besides stevedoring and storing. Now the multinationals and the corporate are heavily dependent on agency relationship to deliver in an effective manner. Here we may cite another example of agency contract in respect of employment of suitable candidates. Numbers of companies are hiring the services of HR consultant to assist them in right sizing and locating the valuable human capital to meet the desired objectives of their companies through rigorous selection process. Moreover, in the shipment of goods to their destined port, the role of clearing and forwarding agencies are worth praising in terms of their services. It is not necessary that the whole tasks of the company be assigned to the agency that performs certain jobs on behalf of their clients. Many relationships do not necessarily require involvement of agency services. Hence, contractors and providers of goods and services do not fall within the category of agency relationship. There are number of laws, which an agency has to follow to perform certain tasks at the behest of their customers. In this particular situation, the law of contract plays key role in defining and discharging responsibilities within the framework. In fact it’s a tripartite relationship amongst a) Self b) Principal and the c) third party. In other words it is a special kind of contract under the agency contract. The principal contract which executes between the principal and the third party is implementable on either sides in favour or against and has the same repercussions as the principal has for self. Since there are no privets of contract between the agency and the third party who had signed the agreement, therefore, the agent has the right to step down. Let us see the important ingredients, which are required to establish an agency a) by signing an agreement b) functional in accordance with law c) authority to strike a deal and d) ratification the act of agent who in some areas does not enjoy the authority of principal to do so. The agency has to perform number of tasks strictly in line with the agreement made and the law of the land. These are a) to accomplish the assigned task or tasks as enumerated in the agency agreement b) to discharge duties with utmost care and responsibility c) to refrain from creating an ugly situation which may jeopardize the interest of the agency and the principal. The agency should not accept new responsibilities which are inconsistent with the assigned task or tasks of the principal. Legally there is no binding on the agency with to regard to take care of the interest of number of principals. The only restriction on the agency is to take into confidence their existing principals so as to avoid potential conflicts of interest. Agency should not engage in self dealing aims at to attract more business. An agent should not steal an opportunity on behalf of their principal for taking advantage himself or passing it to some other performer. It is the bounden duty of an agency to intimate the principal, complete details of the transactions that were carried out. In return of their rendered services, the agency may claim pre-arranged commission or pre decided fee. In broader terms, ratification is the approval of principal on the act of an agent provided the agent lacks the legal authority. The ratification applies to private contract law, constitutional provisions and the international treaties. The best examples of ratification of constitutional amendments are the constitutions of the United States of America and the Canada. The nature of ratification varies from company to company, place to place and country to country. Hence, the ratification of international treaties is backed by filing instruments of ratification in line with the treaty. In number of democratic countries, lawmakers are authorized the government to ratify the international treaties by introducing and passing a bill. In this respect it would not be out of place to mention the example of the United Kingdom where ratification of treaties is the absolute authority of Her Majesty on the proposed bill tabled by the Government. According to the convention, the treaties are to be placed before the parliament, 21 days prior to ratification under the Constitutional Reforms and Governance Act 2010. Arguments of ratification In terms of wider perspective, ratification is the consent of a state with regard to the treaty it has signed earlier. The term of accession is probably used for a State which cannot sign a multilateral treaty, may have her consent on the treaty to be strictly adhered provided it should not violate the provisions of the law of land. With respect to all bilateral treaties, the exchange of ratification instruments now replaced with the mutual notification of “completion of internal procedures”. However, in multilateral treaties, instruments of ratification must be deposited with the depository of treaty. In the mentioned scenario, state or the international organization can be the depository of treaty. As far as the bilateral treaties are concerned, if stakeholders do not sign, then the Contracting States have to notify each other about the required initial procedures to be adopted. The required procedures merit consent of the lawmakers to act accordingly. Usually the enforcement of bilateral treaties comes into force on the date of the second Note. However, in few cases, the treaty in question provides force entry after elapse of thirty days. It could be a good practice if actual date would be specified. The other ways of enforcement of bilateral treaties is to exchange of instruments for ratification. The treaty comes into force once it has been signed. In case a treaty is signed in London, the exchange of instruments takes place in the capital of other signatory’s state. During the course of exchange of ratification instrument, a Certificate of Exchange is required to record the date of exchange documents. Ratification rights on the rules of undisclosed authorized transactions As per the English contract law, ratification of undisclosed principals requires complete or partial disclosure. In accordance with generally accepted norms, undisclosed principals can not ratify the contracts by the agent entered into contract on his own. The rights and obligations of undisclosed principals with reference to authorized or un authorized transactions of principal, certain policies, traditional arguments are not sufficient to pave the way of ratification by undisclosed principals. The author of the treaty should allow ratification of transactions by undisclosed principals. In case the principal is not disclosed at the time of transaction but later on unearthed, the third party may elect to hold such principal since he or she has the real interest. From the above instance, we have noticed that an agent can keep his principal abreast about undisclosed to bind himself with the contract. He or she may do so under the instructions due to carelessness in the way he or she performs his or her agency otherwise due to some reasons or the other he or she chooses to bind him. Under the mentioned scenario, he becomes personally liable to the third person. If the third person discovers the identification of principal he or she may choose to hold the principal. This emanates from the consideration that the principal is the real benefactor in interest to be indentified in transaction along with his agent. In nutshell, we may suppose that if A is keen to buy the goods of B for C. Here, he may have two choices either to act in his own name or to keep the fact concealed that there is another party behind the scene of this buy out. He therefore, makes a contract with C, for certain goods which C delivers him, he or she promises to pay B for certain amount of money. This will be a written agreement executed in the name of A. B can hold A on this contract. Exceptions to Rule First Exception Third person has no right to hold the agent. If the third person elects to hold the agent, he cannot hold the principal later on. The third person if elects to hold the principal, his election should be documented. Second Exception Right to hold the principal by the third person shall depend on the state of relationship between the principal and the agent. If the state of account is such that the principal paid the money to the agent to pay it to a third person, renders the status of agent as inequitable to allow third person to hold the principal. Third person should not hold the principal and satisfy with its recourse against the agent. Third Exception Further, the Rule does not extendable to sealed instruments. Only the person in whose name the sealed instrument is liable to take the responsibility. In the mentioned situation, we have observed that one cannot be held responsible for the sealed instrument if it is not addressed in someone’s name. Consequently the rule does not apply in case the contract is sealed. In some cases where jurisdictions of the seal has lost and in some cases it has altogether abolished. In such background, rule of the State should prevail. Fourth Exception Negotiable instruments are not governed by the rules. In this perspective, only in whose name negotiable instrument is can be held responsible for his or her deeds or misdeeds. What we have observed in this case is that only holder of the negotiable instrument is answerable. Ratification rules on the rights of undisclosed principal in unauthorized transactions Any person who has the intention to provide assistance to the agent to act against the assigned duty of principal is subject to liable in accordance with the law of tort for any harm done to the principal or as per the restitution principal may ask for the profit that derives out from the transaction made by the third person that caused harm to the interest of the principal. Until and unless a party has the reason to believe that the other side acquired double employment, the person who knows that other side of the transaction employed an agent to carry out the transaction for him, may employ the agent in such transaction which will be subject to liability to the other person.  However, the third party is not answerable to the principal for breach of duty if he or she did not take part in the agent’s wrongful act. Hence, a principal may not recover certain amount of money from another party on the basis of twisted representation made by the principal’s own agent. In another situation, If an agent purchase personal property out of principal funds, it may be taken by a third person, despite innocent, having no choice to exercise the power of the principal, who paid for the same since the third party cannot ordinarily have any better title than the agent enjoyed. The principal under no authority conferred to a third party, discover and notify a wrongfully disposed of property through an agent who does not assume to carry out the transaction regarding disposing of property on behalf of the principal. In the mentioned transaction, principal in any way is not liable or responsible for the agent’s acts with regard to fraudulent disposal or conversion of the property. Further, the party at fault should be held responsible for transferring the property wrongfully in someone’s name. Keighley Maxted & Co. v. Durant Facts of the Case The company K & Co. authorized Roberts, trader of corn merchant, to purchase wheat on a joint account at a certain price. Roberts, without taking into confidence and without lawful authority bought wheat at a higher price than the market price from Durant. The mentioned transaction was carried out on behalf of K&C and it was not disclosed to Durant by the Roberts. K & Co, later on endorsed the act of Roberts. Since the wheat was purchased at a higher price, therefore, Durant resold it at a loss and subsequently sued against the people at fault. Issues The issue before the competent jurisdiction was whether a written contract made by a person empowers to act on his own behalf solely, and without the consent of principal. Having an undisclosed intention to pass on the benefit of the contract to a third person, can be ratified, so as to make him responsible or liable to be sued on the contract. Special Jury Special Jury on hearing the case in details, dismissed the proposed action against the K & Company on the grounds of no ratification clause was provided in the law of contract, hence, announced the judgment against Roberts for the claimed amount. Court of Appeal  Against the judgment of the special jury, the defendant filed review petition in the court of appeal which ordered re-trial of the case on the ground of available evidence for the jury. The evidence confirmed that Roberts stroke the deal at the behest of self and the appellants. It was made clear by the competent court of law that a contract executed by a man on his own, at the behest of a third party who did not authorize him to do so but keeping his intention secret may be rectified that enables him to sue against such contract. Discussion In the light of the above discussions and judgment, we observed that in English law there is no absolute authority for the proposition. If a contract is made by the agent on his own name as the existing contract under discussion does not necessarily require any ratification if it is complete in all respects. The other view as per the mentioned citation that English law is in favor of the proposition (reference is made to Foster v. Bates, judgment of Collins L.J., notes to Armory v. Delamirie). Further, in case the agent intends to strike a deal on behalf of a principal, though he does not enjoy the express intention, the written contract can be ratified by the principal to bind him. Conclusion Review of the Ratification rules on the rights of undisclosed principal in authorized and unauthorized transactions that the transactions in question needs ratification where the principal does not give any specific authority to the agent to perform such duties. If transaction made by the agent without any lawful authority of the principal can be treated as void. Therefore, the agent has to bear the brunt. Read More